How CPEC Could Help Address Pakistan’s Chronic Power Shortage Issue 2

The China-Pakistan Economic Corridor (CPEC) could help address a social issue in Pakistan

China’s (FXI) (ASHR) (MCHI) dream project, the China-Pakistan Economic Corridor (CPEC) taking off in 2017 is certainly good news for Pakistan (PAK). In its first Joint Cooperation Committee (JCC) meeting on the CPEC in 2013, Pakistan had expressed its demand to give priority to energy projects to help generate over 10,000 megawatts that could help plug the acute electricity shortage facing the nation.

10,400 MW versus the 10,000 MW required

According to Mr. Zhao Lijian, the deputy chief of mission of the Chinese embassy in Pakistan, the Chinese decision-makers had advised an energy mix formula to meet Pakistan’s electricity shortage needs including coal, wind and solar projects. “The energy projects are far ahead of their scheduled timelines. Once completed, they would produce 10,400 megawatts of power, far more what the shortage Pakistan faces,” said Lijian. “The Corridor is granting enhanced connectivity and power to the otherwise diffracted and energy-hungry economic centers of Pakistan.”

Currently, the CPEC’s early harvest projects (about 17 in number, costing about $16 billion) are either completed or are in a near completion stage. 11 of these 17 projects are in the energy sector. Over 30% of all CPEC projects are in Balochistan, Pakistan (16 of 51). The Sahiwal Coal Power Project (80% complete), the Pakistan Port Qasim Power Project (70% complete), the Dawood Wind Power Project and the Quaid-e-Azam Solar Park are few examples.

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Chinese investment in Pakistan has picked pace

Energy projects, as part of the CPEC, have led to a lot of Chinese companies investing in the region. The China Machinery Engineering Corporation (HKG: 1829), Power Construction Corporation of China (SHA: 601669), Zonergy, Shanghai Electric (HKG: 2727), and China Power International Development (HKG: 2380) are examples of Chinese companies involved in CPEC energy projects in Pakistan.

Pakistani companies such as United Energy Pakistan, China Overseas Ports Holding Company Pakistan are also actively involved in such projects.

Pakistan’s budgetary disbursement

According to a recent report, the federal government in Pakistan has released 430.94 billion rupees ($4.1 billion) for different social sector developmental projects under the Public Sector Development Programme (PSDP) 2016-17 as against the total allocations of 800 billion rupees ($7.6 billion). From this, about 94.7 billion rupees ($0.9 billion) have been disbursed towards the Water and Power Development Authority and other power sector projects as against the total allocation of 130 billion rupees ($1.24 billion) allocated for the current fiscal year, to overcome the shortage of energy (XLE)  in the country.

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